Office of the
Illinois Attorney General
Kwame Raoul

Chicago – Attorney General Kwame Raoul, as part of a coalition of 24 attorneys general, today filed a comment letter opposing a proposed federal rule that could put federal funding for Medicaid at risk and interfere with state oversight of health insurance and operation of state health insurance exchanges.

The rule was proposed by the Centers for Medicare & Medicaid Services (CMS), a federal agency within the U.S. Department of Health and Human Services responsible for overseeing and administering Medicaid, the joint federal-state program that provides health coverage to low-income individuals and families. Before a rule like this can take effect, the public – including states – must have a chance to weigh in by filing comments. Raoul and the coalition’s comment letter argues that in this case, CMS is rewriting the rules in a way that goes beyond what Congress authorized. 

“This rule would add complex restrictions on the ability of states to provide healthcare to their residents,” Raoul said. “The federal government should be making it easier – not harder – for states to provide essential healthcare to the millions of low-income individuals, families and children, as well as individuals with disabilities who rely on the Medicaid program.”

Specifically, the proposed rule could change how the federal government treats certain taxes, fees and other payments collected by states. CMS has described its proposal as being intended to ensure that states pay their share of the cost of Medicaid. But the proposal would in fact extend far beyond that purpose and would affect taxes and payments unrelated to Medicaid, improperly interfering with state regulation of health insurance and health care exchanges.

In the comment letter filed with CMS, Raoul and the coalition raise four key concerns: 

• The proposed rule would improperly interfere with state regulation of health insurers. For the first time, CMS would penalize states for collecting taxes and payments from health insurance companies by reducing the amounts the states would receive for Medicaid. This would violate the law, threaten states’ Medicaid programs and improperly interfere with states’ regulation of health insurance. 

• Improper application of new limits to taxes and payments collected from health insurers. A law passed by Congress in 2025 imposes new limits on some taxes and payments collected by states. CMS’ proposed rule would apply those limits to taxes and payments on health insurers, but that is neither required nor allowed under the 2025 law.

• Eliminate a 30-year-old safety valve. CMS has also proposed to change its criteria for determining when taxes and payments will reduce federal Medicaid contributions. But some of these criteria were written into federal law by Congress and can’t be changed by CMS.

• Pile on costly new paperwork. States could have to reconstruct financial records going back to mid-2025 and build entirely new reporting systems from scratch.

In their letter, Raoul and the coalition highlight how states are already financially stretched thin in funding health coverage for their residents. The proposed rule would add new federal overreach and red tape on top of that, without adequate legal justification. They also warn that if the rule goes through as proposed, it could squeeze state budgets and put Medicaid funding at risk, and interfere with state insurance oversight and operation of Affordable Care Act health exchanges, all programs the states rely on to keep residents insured.

Raoul and the coalition are urging CMS to withdraw or significantly revise the proposed rule.

Joining Raoul in sending the comment letter are the attorneys general of Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Hawaii, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia, Washington and Wisconsin.